6. Factory

(a) In a factory with four Production Departments and two Service Departments, the operating costs for the month of October were as shown below. The cost of running the canteen is apportioned to each department on the basis of the estimated use of the canteen by the employees ir, .ach department. Similarly, the cost of the boiler house is apportioned on the basis of the estimated consumption of power used by each department

The Service Department costs are apportioned as follows:

You are required to prepare a cost statement showing the costs of operating the four Production Departments after the costs of the Service Departments have been reapportioned to each Production Department.

(b) Comment briefly on the problems associated with apportioning Service Department costs to Production Departments.

Transcribed Image Text:

Costs for October were: Production Department: 1 200,000 2 500,000 3 300,000 4 400,000 Service Department: Canteen 50,000 Boiler house 100,000. Total 1,550,000